Abstract
Rate regulation is studied as a bargaining process in which consumers and the firm negotiate output and payments under asymmetric information. The feasible set of transactions given incentive compatibility and individual rationality constraints is characterized. The set of interim incentive efficient mechanisms for the direct revelation game is also characterized. Sufficient conditions are given for efficient mechanisms to be full information efficient. Efficient mechanisms are identified which correspond to nonlinear monopoly pricing, monosony compensation schedules, and the Baron-Myerson regulation model.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 251-268 |
| Number of pages | 18 |
| Journal | Journal of Economic Theory |
| Volume | 44 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 1988 |
Funding
* I thank David Baron, Robert Becker, Roger Guesnerie, Thomas Holmes, Jean-Jacques Laffont, John Ledyard, Michael Magill, and Jean Tirole for helpful discussions. I thank an associate editor and referee for useful suggestions. Support from the National Science Foundation under Grant No. SES-82-19121 and Grant No. SES-86-08115 is gratefully acknowledged. I also thank participants in the Hoover Institute Seminar on Collective Choice, the Bell Communications Research Conference on Regulation and Information, and the QRSA-TIMS session on Bargaining for helpful comments. Any errors are my responsibility. i Lee [ 161 notes that consumer and firm “intervenors may affect the regulatory outcome by providing information to the regulator sirategically.”
ASJC Scopus subject areas
- Economics and Econometrics